Type I diabetes (T1D) is a T cell mediated autoimmune disease that causes the destruction of pancreatic beta- cells and leads to insulin dependence in affected individuals. The loss of islet function may be the consequence of chronic rejection of islets by the autoreactive T cells. The long-term benefits of islet transplantation for end-stage T1D patients are not yet clear. The future success of islet transplantation as curative of T1D critically depends on the design of alternative, clinically relevant strategies to overcome the autoimmune response against auto-antigens thus leading to long-term islet survival. T regulatory cells (Treg) have been shown to play a critical role to control autoimmune disease in a number of models. The naturally occurring cell lineage that can induce Treg development has been investigated. Using tumor models, we have found that the growth of various carcinomas induces a significant increase in the numbers of myeloid suppressor cells (MSC) in tumor infiltrating leukocytes (TILs), spleen, and bone marrow of tumor-bearing mice, which play an important role in the tumor evasion of the anti-tumor response. The accumulation of MSC in tumor bearing mice is mediated by the factors secreted from tumor cells, e.g. stem cell factor. We demonstrated, both in vitro and in vivo, that sorted Gr-l+CD115+ MSC, but not Gr-TCDllS' or Gr-TCDllS" cells, can induce activated T cells to become Treg. Relevant to this R21 application, which is quite different from our ongoing research, we tested whether MSC could prevent the destruction of islet cells by autoreactive T cells, and found that the sorted MSC induced autoantigen specific T-cell anergy and prevented diabetes. These results provide strong evidence that MSC may play an immunoregulatory function in the establishment of immune tolerance and the development of T regulatory cells, leading to the prevention of diabetes. To achieve long-term prevention of the autoimmune response and to improve the therapeutic effect of MSC mediated immune suppression, the detailed immune suppression mechanisms need to be further investigated. The means to generate highly potent MSC from hemopoietic stem cells (HSC) needs to be established in order to facilitate the development of this novel therapeutic modality for the treatment of T1D. Three specific aims will be pursued: 1) to understand the mechanisms by which MSCs mediate T cell suppression in the diabetic Ins-HA/RAG' mouse model, 2) to prevent the onset of diabetes in NOD mice (native diabetes antigens) by treatment with MSC, 3) to understand and control MSC development from primary HSC and HSC derived from KO or siRNA knockdown cell lines and test their immune suppressive effect in the diabetic mouse model. Successful completion of these studies will result in a method for treating T1D using antigen specific immune suppression induced by MSC. This information will be utilized as the scientific foundation for the development of a novel therapeutic modality to intervene in the autoreactivity associated with autoimmune diseases, in general.